Hulu Plus rockets 500% to 1.5M paying subribers

The video streaming service revenue grows 60% to $420M

I have been an avid user of Hulu of more than two years but I have not yet committed to becoming a paid subscriber. I am really waiting for them to offer their service on Wii before I fork over the $7.99 a month.

But the online streaming service owned by NBCUnviversal, News Corp., The Walt Disney Company and Providence Equity partners has hit the 1.5 million paying customers mark, according to Hulu CEO Jason Kilar on Friday.

That's a 5X growth rate from the 300,000 paying subscriber base signed up to Hulu Plus at the end of 2010. Hulu Plus offers more shows, movies, ad-free viewing and access to full series' rather than selected episodes.

Kilar explained that the company grew 60% from 2010 to approximately $420 million in revenue for a service that allows users to watch Hulu content on their computers, TV, gaming devices, tablets and smart phones.

Netflix still holds the lion's share of online television and movie watching for the same $7.99 rate of unlimited streaming on multiple devices, even after loosing nearly a million subscribers due to rate hikes and missteps. Netflix still clocks in at close to 23.8 million subscribers.

Original content, exclusive rights are the keys

Hulu has been following the lead of other online video content providers by creating original content and gaining exclusive rights to shows like Tracy Ullman's 'State of the Union' and a Web series called 'The Booth at the End.' The move for exclusivity and production of original content has also been made by Netflix and YouTube to have unique reasons why people should come to their site as opposed to others.

YouTube has spent $100 million to create channels with orignal content while Netflix has announced the launch of two original premium series' and Yahoo has signed a deal for a animated Web series with Tom Hanks.

Hulu Plus is attracting twice the number of subscribers each day compared to the same time last year with double the content available for viewing.

Content on the site comes from Fox, NBC, FX, ABC, CW, Univision and many others.

Hulu has been able to access the content and the viewership, greatly, because of the advertising market that compensates for the premium content shown. Hulu has attracted a large stable of 1,000 brand advertisers since its inception in 2007. They have even launched an Hulu Ad Swap and Hulu Ad Selector service that not only allows the viewer to choose the content in the ads they watch, but also help the brands and marketers understand the preferences of people viewing a particular program.

"We have been focused on building a strong foundation that empowers the Hulu team to best serve customers (users, advertisers, and content owners)," said Kilar in a blog post. "As just one example, our dual revenue stream Hulu Plus business model enables us to compensate content owners much more than anyone else in the online subscription market on a per subscriber basis. We believe our approach will enable us to secure more valuable content for our users and to secure content in more attractive windows than would otherwise be possible."

A study released in October showed that Hulu has held strong in the realm of advertisement, while it still needs help capturing a broader, more devoted audience.

Americans average 20 hours watching a video in a month, but of that time, only 1.4% of that time was spent watching video advertisements, according to comScore. That is a staggering fraction compared to the 16-30% of advertising allotment from standard cable consumption.

And, this isn't because ads are always a fraction of the video viewing time anyway. It's because across the Web, only 17% of video content has an advertisement on it, leaving a lot of opportunity for advertisers.

Hulu led the pack in streaming video advertising for the month of September. But that was only 8% of the U.S. Internet population. Just over 85% of the US Internet audience watches video online.

And while Hulu trails behind Netflix in the amount of time spent on the site viewing content (Netflix sees and average users watching for 10 hours per month and Hulu sees just two and a half hours), they are in the top five sites online.

Hulu was fourth with nearly two and a half hours per month.

Netflix has shown the largest command of viewers using game consoles to watch their video, with 50% of Netflix users watching on some gaming device, while only 8% of Hulu users viewing videos in that manner.

Hulu, however, commanded the most viewers watching directly from their computer (89% of Hulu users.)

Hulu plans to invest $500 million in fresh content in 2012 to see if it can continue to capture the attention of video viewers online.